**Exhibit 10.79**

 

November 5, 2004 

 

Residential Funding Corporation 

2711 N. Haskell Ave., Suite 900 

Dallas, Texas 75204 

 

 

Ladies and Gentlemen: 

 

Reference is made to (i) that certain Credit Agreement, dated as of October 15, 2004, between SunLink Health Systems, Inc. and its Subsidiaries listed onthe signature pages thereto (collectively, the “Company”) and Residential Funding Corporation (the “Lender”) pursuant to which Lender agreed to extend to the Company a revolving credit and term loan facility in theoriginal principal amount of $30,000,000 (the “Credit Agreement”), and (ii) the other agreements instruments and documents issued in connection with the Credit Agreement (together with the Credit Agreement, the “LoanDocuments”). Capitalized terms not defined herein shall have the meaning assigned to such terms in the Credit Agreement. This letter constitutes notice to the Lender required under Section 5.1(i) of the Credit Agreement of a Default orEvent of Default under the Credit Agreement, as more fully described below (the “Existing Default”), and a request for a waiver of the Existing Default. 

 

Pursuant to Section 7.1(k) of the Credit Agreement, it is an Event of Default if the maturity of any material Indebtedness(Indebtedness in excess of $500,000) is accelerated, if any Borrower or Subsidiary thereof shall fail to pay any such Indebtedness when due, or if any Borrower or Subsidiary thereof, shall permit the holder of any such material Indebtedness to causethe material Indebtedness to become due before its stated maturity. As more fully described below, Healthmont Inc., a Borrower under the Credit Agreement (“Healthmont”), has defaulted under a leasing arrangement and has received ademand for payment of past due amounts in an amount equal to $837,943.92 (the “Past Due Amounts”), the failure of which to pay may result in the acceleration of all obligations under such lease and is an Event of Default under theCredit Agreement (the “Existing Default”). 

 

Healthmont is lessee under a Master Lease Agreement (the “Master Lease”) with GE Commercial Finance, Healthcare Financial Services (“GE”), as lessor. The Master Lease is a capital lease and relates to thelease of equipment to three hospitals, two former Healthmont hospitals (Westmoreland and Dolly Vinsant) and one hospital still owned by Healthmont (Adel). Although Healthmont sold the Westmoreland and Dolly Vinsant hospitals, it remains the primaryobligor under the Master Lease for all three hospitals. Recently, Westmoreland Hospital went into receivership and Dolly Vinsant and Adel failed to pay certain lease payments when due, all of which constitute defaults under the Master Lease. As aresult Healthmont has received a demand letter from GE dated November 2, 2004, pursuant to which GE has made a demand for payment of the Past Due Amounts which are for all three hospitals. The amount due from Westmoreland Hospital represents thetotal amount due from Westmoreland under the Master Lease and the amounts due from Dolly Vinsant and Adel represent only the past due lease payments. According to the GE letter, if the Past Due Amounts are not paid by November 12, 2004, it willresult in an acceleration of all obligations due under the Master Lease which, together with the Past Due Amounts, is an amount equal to $1,322,664.56 (the 

“Acceleration Amount”). The Company is presently considering its options with respect to GE’s demand forpayment and these options include, negotiating with GE to repossess and relocate the Westmoreland equipment to another Company-owned hospital, obtaining a waiver of defaults and reinstating the Master Lease and cross-claiming and/or making a claimfor indemnification under the Westmoreland and Dolly Vinsant sale documents. In connection with the foregoing, the Company hereby respectfully requests the Lender’s waiver of the Existing Default, including any acceleration that may follow andrequests that Lender evidence such waiver by executing and delivering the attached Acknowledgment, Waiver and Consent. 

 

The Company acknowledges and agrees that (i) the descriptions of events and facts contained herein constitute representations and warranties under a LoanDocument for purposes of Section 7.1(c) of the Credit Agreement; (ii) if the amount accelerated under the Master Lease exceeds the Acceleration Amount, a new Event of Default will exist under the Credit Agreement; (iii) prior to paying any amount toGE, the Company shall provide evidence satisfactory to the Lender that the amount to be paid is due and owing; (iv) this waiver is not intended, and is not be construed, as an amendment of, or any kind of consent or waiver related to, the CreditAgreement, other than as expressly set forth herein with respect to the Existing Default, for example, the Lender is not waiving any Event of Default or any breach of any covenant in the Credit Agreement that may arise as a result of payment ornon-payment under the Master Lease other than the breach that constitutes the Existing Default); (v) shall not represent a consent or waiver related to any future actions of the Company, including, without limitation, any future Defaults or Eventsof Default, and (vi) does not create any obligation of the Lender to consider or agree to any further waivers or any consents. 

 

 

Very truly yours,

 

 

SUNLINK HEALTH SYSTEMS, INC.
/s/    J. T. Morris
Name:
 
J. T. Morris

Title:
 
CFO

 

 

 

HEALTHMONT, INC.

 
/s/    J. T. Morris
Name:
 
J. T. Morris

Title:
 
President

 

 

**[SIGNATURES CONTINUED ON NEXT PAGE]**

SUNLINK HEALTHCARE, LLC, 

DEXTER HOSPITAL, LLC, 

CLANTON HOSPITAL, LLC, 

SOUTHERN HEALTH CORPORATION 

OF ELLIJAY, INC., 

SOUTHERN HEALTH CORPORATION 

OF DAHLONEGA, INC., 

SOUTHERN HEALTH CORPORATION 

OF HOUSTON, INC., 

HEALTHMONT OF GEORGIA, INC., 

HEALTHMONT OF MISSOURI, INC., 

HEALTHMONT, LLC, 

HEALTHMONT OF MISSOURI, LLC, 

SUNLINK SERVICES, INC., 

OPTIMA HEALTHCARE CORPORATION 

KRUG PROPERTIES, INC. 

 
/s/ Mark J. Stockslager
Name:
 Mark J. Stockslager
Title:
 
Asst. Secretary

 

 

 

**ACKNOWLEDGMENT, WAIVER AND CONSENT**

 

The undersigned, by and through its duly authorized representative herebyacknowledges and waives the Existing Default in consideration of and reliance upon the acknowledgments and agreements of the Company. 

 
RESIDENTIAL FUNDING CORPORATIONBy: /s/    Angela D. Brown
Name:
 
Angela D. Brown

Title:
 
Senior Vice President